DIESEL REPORT: Midwest fuel prices top those in California

| 8/11/2006

Aug. 11, 2006 - Scattered reports of fuel stops imposing limits on diesel purchases continue in Colorado and Wyoming as the per-gallon price continues to increase.

Everything from strikes in Nigeria by owners of fuel tankers, to the EPA-mandated switch to ultra-low sulfur diesel, to the needs of U.S. farmers to irrigate more because of drought is being blamed for the disruption and depletion of diesel supplies.

Then there's the problem with the BP Amoco PLC pipeline coming out of Prudhoe Bay, AK. The announcement that corrosion in the pipeline would require a shutdown for repairs greased the wheels of the crude oil futures roller coaster. Other events around the world this week - such as a foiled terrorist plot in England on Thursday - further fueled the ride.

Crude went above $77 per barrel early in the week, but following the announcement of the arrests in England, fell 3.1 percent to $74 Thursday, which was the biggest drop since May 15. By mid-day Friday, the price had rebounded to $74.45.

As of press time Friday, the arrest tally in England was up to 24, while related arrests in other countries were ongoing. The alleged terrorists were plotting to use liquid explosives to bring down 10 or more commercial jets headed toward the U.S. The suspects were not arrested at airports, but rather were taken into custody at their homes and other locations.

One aspect of the ripple effect from the British arrests is that some transportation and oil analysts are predicting a drop in air travel, which will mean a drop in demand for jet fuel. That means more distillates could be available for diesel production.

But that won't have an immediate impact on the prices at the pump, and neither should the Alaskan pipeline problems, according to a U.S. official from the Energy Department.

Earlier this week an analyst with the U.S. Energy Information Administration, Tancred Lidderdale, released a statement saying that the pipeline shutdown "certainly isn't going to create any shortages in gasoline, diesel fuel and other petroleum products."

Still, the per-gallon prices continue to dribble up, just like water running uphill in a carnival fun house, but truckers aren't having much fun at fuel islands.

Friday afternoon at the headquarters of the Owner-Operator Drivers Association in Grain Valley, MO, trucker Bryan DePoy of Royal Center, IN, said that he had just seen diesel for $3.29 per gallon in Nebraska. He knew that was high, but when a buddy called him reporting he had just filled up north of Sacramento, CA, for $3.07 per gallon, DePoy couldn't believe it.

The OOIDA switchboard reported an increasing number of calls from members as this week progressed regarding the price and availability of diesel in certain regions. One member calling from the Northeast said he had seen diesel at $3.47 per gallon.

ProMiles reported that the average price for a gallon of diesel in Colorado increased a penny from $3.333 on Thursday to $3.343 on Friday. For California, ProMiles reported an average of $3.23 on Thursday and $3.24 on Friday.

In Wyoming, ProMiles reported bigger increases. On Wednesday diesel was averaging $3.166 in Wyoming. Thursday it was 2 cents higher at $3.187 and Friday it was up by a nickel, having gone to $3.238 per gallon.

The national average was also up. Friday ProMiles was reporting it to be $3.119. It was reported as $3.118 on Thursday and $3.111 on Wednesday.

Meanwhile, the U.S. Department of Energy issued its revised estimates this week of what the average price of diesel will be this summer - $2.91 per gallon, or about 20 cents less than the current national average.

And, the DOE's weekly report on the nation's strategic oil and fuel reserves on Wednesday showed that even though crude inventories fell by 1.1 million barrels last week, the U.S. inventory is at a five-year high. However, the DOE's weekly report also showed that an increase in ultra-low sulfur diesel was more than offset by a decrease in regular diesel inventories.

- By Coral Beach, staff editor